Goldman Sachs’s ‘Never Say Never’ Defense

Defending their firm’s actions leading up to the financial crisis is a tricky business, executives at Goldman Sachs have found. It was a crazy time, and it’s a big company, and a lot of things were going on all at once. They’re sure they didn’t do anything that was technically wrong, but all it takes is one person to leak a document that proves your exposure to a failing institution is far more than the “zero” you had been claiming, and then everyone is all, “We knew it, they’re liars, they’re evil.” But chief financial officer David Viniar has found a way around this problem, he reveals in an interview with BusinessWeek.

Viniar won’t say that Goldman never took a short position on securities it sold to clients — “I could never use the word never,” he says. Viniar’s point is that it wasn’t standard practice, that Goldman didn’t tell clients to do one thing while it did the opposite.

Now this is the way to do it. Keep it vague, keep it fluid, keep an edge of deniability; that way no one can use your words against you when it turns out you are completely full of crap. For instance, did anyone at Goldman Sachs suspect that AIG was un petit peu over its head vis-à-vis credit default swaps? Viniar is pretty sure that the people whose job it was to do due diligence on the company were completely blind to that possibility, but he wouldn’t stake his life on it. Does Goldman front-run their clients? Viniar doesn’t think so, but how can he know what all the brokers are doing, it’s not like he has eyes in the back of his head! And is it true that Goldman executives club baby seals in the basement? Viniar is pretty sure not, but he wouldn’t swear on his mother’s life.Etc.